'Zimbabwe's nostro facility to run for 8 months

Published: 05 October 2017 (868 Views)

RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya yesterday said the US$600 million nostro stabilisation facility from the African Export Import Bank (Afreximbank) will help alleviate foreign currency shortages on the market for the next eight months.

Mangudya told journalists on the sidelines of a Confederation of Zimbabwe Industries breakfast meeting in the capital that the facility would close a hard currency supply gap created by the end of the tobacco selling season in August.

"This facility will last us for six to eight months because during the tobacco season, we received only US$320 million in tobacco foreign receipts and this lasted for six months. We could have asked the Afreximbank for US$300 million nostro stabilisation but due to the increased demand for foreign currency in the economy, we settled for US$600 million," he said.

Tobacco is one of the country's largest foreign currency earners. It earned the country over US$600 million last year.

Last month, Mangudya told The Financial Gazette that the foreign payments backlog had worsened to $570 million, from $186 million in May.

The nostro stabilisation facility secured from the Cairo-headquartered lender is also expected to address the current delays faced by industry in processing outgoing payments for the procurement of critical raw materials.

The depletion of nostro balances has been blamed, in part, on the perennial current account deficit.

Continued foreign payment challenges have made the country a less preferable destination for foreign capital.

The payment challenges have also resulted in local companies struggling to procure raw materials.

Mangudya said the country has started drawing down on the fund, with some of the money going towards the procurement of fuel and raw materials for cooking oil.

Economic experts said this is positive in the short-term as banks have been struggling to settle maturing lines of credit.